NCPA - National Center for Policy Analysis

Reforming Medicaid: Lessons from Canada

August 23, 2012

Paul Ryan's proposed Medicaid plan is similar to Canada's Medicare program, which is considered very successful. For both Democrats and Republicans, it is necessary to take a look to the neighbor up north on how to change Medicaid for the better, says Evan Soltas in Bloomberg.

  • The Canadian government abandoned its previous 50-50 cost sharing plan in 1977.
  • Now, the Canadian program utilizes block grants, which are evenly distributed to different provisional and territorial governments.
  • This has given decentralized administrations flexibility to design their own programs and learn from one another on how to best deliver Medicare to their populations.
  • Additionally, this has led to innovative ways to improve the quality and reduce the cost of services, since the local governments are responsible for 100 percent of added costs.

This program has been an effective mechanism for controlling health care costs.

  • Nearly 11 percent of Canada's gross domestic product (GDP), or $4,196 per capita, goes toward health care costs.
  • In the United States, health spending constitutes 16.2 percent of the GDP, or $7,410 per capital.
  • In addition, the rate of health care cost inflation is less problematic: a net 65 percent rise from 1993 to 2005 in Canada versus a 90 percent increase in the United States over the same period.

Block grants are a staple of public policy in the United States. From Temporary Assistance for Needy Families to Partnership for Health Program, block grants constitute 20 percent of federal aid to state governments.

Paul Ryan's proposed plan would have the block grants grow at the rate of consumer price inflation along with population growth. However, such a plan should grow at medical cost of inflation plus the rate of the Medicaid-eligible population since Medicaid is not available to every citizen. Such additions to Ryan's plan would make Medicaid sustainable and allow the grants to continue to grow through hard times.

Source: Evan Soltas, "What Paul Ryan, and His Critics, Can Learn from Canada," Bloomberg, August 19, 2012.


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